Abstract
This paper investigates whether technology spills over across national borders and technology regimes. We advocate a modeling strategy where improvements in technical efficiency capture technology spillovers as industries absorb and implement the best-practice technology. Dynamic panel-based techniques are used to determine whether efficiency series move together in the long run (cointegrate) and/or move closer together over time (converge). We control for technological heterogeneity and for cross-sectional dependence in the data. For a panel of manufacturing industries in six EU countries, we find evidence of technology spillovers and convergence among industries’ efficiency levels across countries and mainly across adjacent technology regimes.
Highlights
Technology is a major driving force of economic growth (Romer 1990; Rivera-Batiz and Romer 1991; Grossman and Helpman 1991)
This paper investigates whether technology spills over across national borders and technology regimes
For industries in each technology regime, we calculated the marginal rate of technical substitution (MRTS), as the negative of the ratio of the marginal product of labor capital
Summary
Technology is a major driving force of economic growth (Romer 1990; Rivera-Batiz and Romer 1991; Grossman and Helpman 1991). The non-rival characteristics of technology imply investments in technology do benefit the investors and contribute to the knowledge base that is publicly available to them. These externalities are called technology spillovers (Romer 1990). A large literature has examined the significance of purely domestic spillovers (see Mohnen 1996, for a survey), or domestic spillovers in conjunction with foreign spillovers (Coe and Helpman 1995).1 Technology transmission, both domestic and foreign, has been found to play a significant role in promoting productivity and economic growth Countries benefit from technology flows if they have the ‘appropriate’ technology (Abramovitz 1986; Basu and Weil 1998) and sufficient ‘absorptive capacity’ (Abramovitz 1986; Cohen and Levinthal 1989).
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